“When did Software as a Service get its start?” might sound like a straightforward question, but it isn’t. In one way, you could say that when timesharing systems were all the rage more than 30 years ago, all software was delivered to customers as a service. Mainframe systems were simply too expensive for most companies to buy their own systems. A couple of decades later, minicomputers, servers, and personal computers changed the dynamics of the market. Economically, it was feasible for any Tom, Dick, and Harriet to own their own systems and the software. Not all software moved to an internal model however. (Software such as ADP’s payroll system, for example, remained Software as a Service.)

Two key events converged to create the model that we now call Software as a Service (SaaS):

✓ First, the Internet became a commercial platform.

✓ Second, software costs and complexities became so difficult that running, upgrading, and managing software become too complex for many companies to manage. This was especially true for small- and mediumsized companies that didn’t want the expenses of managingall the components. These companies were the first to embrace this new generation of SaaS. Today, SaaS is the most mature area of cloud computing. SaaS gained initial traction with the customer relationship management (CRM) market and has expanded into others – particularly the collaboration market and the enabling tools and management environments. In this chapter, we explain what SaaS is, talk about its business model, and discuss the types of vendors that are in the market today.